How could investors be so certain that markets would always be liquid?, Klarman wondered. He feared that investors were turning “a blind eye to the consequences of ‘outlier’ events,” such as the sudden disturbances and occasional crashes that, historically, have always upset the best-laid plans of investors. In general, Klarman warned, “Successful investors have positioned them-selves to avoid the 100-year flood. Increasingly, that way of thinking has become passé.” Turning to the former Salomon traders’ fund—that is, to Long-Term—Klarman noted that, given its projected leverage, even a single
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